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Journal of Risk and Uncertainty

, Volume 57, Issue 3, pp 281–299 | Cite as

Subjective beliefs and confidence when facts are forgotten

  • Igor Kopylov
  • Joshua Miller
Article

Abstract

Forgetting can be a salient source of uncertainty for subjective beliefs, confidence, and ambiguity attitudes. To investigate this, we run several experiments where people bet on propositions (facts) that they cannot recall with certainty. We use betting preferences to infer subjects’ revealed beliefs and their revealed confidence in these beliefs. Forgetting is induced via interference tasks and time delays (up to one year). We observe a natural memory decay pattern where beliefs become less accurate and confidence is reduced as well. Moreover, we find a form of comparative ignorance where subjects are more ambiguity averse when they cannot recall the truth rather than never having learnt it. In a different vein, we identify an overconfidence pattern: on average, subjects overpay for bets on propositions that they believe in, but underpay for the opposite bets. We formulate a two-signal behavioral model of forgetting that generates all of these patterns. It suggests new testable hypotheses that are confirmed by our data.

Keywords

Memory decay Overconfidence Comparative ignorance Revealed beliefs Ambiguity aversion 

JEL Classifications

D81 C91 

Notes

Supplementary material

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of California, Irvine (UCI)IrvineUSA
  2. 2.Fundamentos del Análisis Económico (FAE)Universidad de AlicanteAlicanteSpain

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